Begun Thursday Oct 18 2012
Updated Friday october 19 2012
Michael Belkin says his model makes his living. He predicts a 40% decline over the next 12-15 months. I believe the markets will top out but I doubt anyone has a good read on where the bottom will be.
Everybody who is anybody is in the Financial Services Forum. Click in the news article to see who signed the letter warning of the fiscal cliff. Or as our analysts say, do your ____job Congress. Do you suppose that helps explain a going nowhere stock market?
GOOG missed its earnings estimate by over a buck knocking down the NASD 1% and causing a trading halt in the shares.
TLT is down again today as money appears to be moving out of bonds. But GDXJ is down as well along with the gold price.
Friday October 19, 2012 5:18 AM CST
This is the 25th anniversary of the 1987 stock crash.
Some sort of cycle low has gripped the markets this week. This morning gold is down another $10. The inverse correlation between shares of gold miners and the bonds has weakened. TLT has been down pretty hard the last couple of days but that has not helped GDXJ. So let's take a look at the ration chart of
GDXJ versus TLT
It actually looks like the GDXJ chart itself. So the mining shares are still outpacing the bonds and the uptrend is intact.
TLT Bond Fund
The Ratio chart remains above its 200 day MA while the TLT chart tests its 200 day MA. This appears to be make or break time for TLT and the public's love with bonds. My last short term prediction of TLT falling did not work out. I am out of the markets so we will let TLT speak for itself.
It may well be that pre election jitters simply has the markets sidelined. Markets loathe uncertainty and that is all we have had.
It has been a rally in the larger cap stocks. The transition to mobile phones and tablets has taken a toll on the NASD and QQQ. Here is a ration of the NYSE versus the QQQ.
Clearly the money has been moving into the larger caps over the smaller.
We, any of us, cannot make the markets move in any direction. But GDXJ and AAPl remain in up trends. The larger picture as we showed with the monthly graph of XLF, the banks, is one of a market moving into a topping formation as we near the beginning of the 40th anniversary of the 1973-74 Bear Market.
Yesterday GOOG dropped 70 points in minutes on the announcement that it has earned 'only' $9 rather than the $10+ per share expected. Nine bucks on all the Google shares is still a staggering amount of money but that is the way hot stocks finally get hammered. I read that Foxconn cannot adequately supply all the iPhones Apple expected to sell the 4th quarter. The expectation was a staggering 50 million phones world wide. This is just like the 'skyscraper' expectation for GOOG earnings. All the good news in the world is expected at market tops and assumed by the players. This is what makes it dangerous to be hanging around in a short term sideways trend.
We don't claim to be indifidual stock pickers but Google
- is selling Android based equipment on slim margins hoping to make money on content like Amazon
- lost money on the Motorola Mobile acquisition
- is locked into a price battle with other tablet makers as retailers both online and in shopping centers vow not to lose a sale to anyone else
All that speaks to lower margins for everyone.
Internal Indicators have Come a Long Way in A Short Time
Yes this internal indicator has done what it needed to do. I am not sure anyone has really made any money on the move up but it did move up. As it moves back to perhaps its former highs, we expect any top to be short lived once the post election reality of the Fiscal Cliff, Europe, etc begins to dawn. Recall our exit was just about here on this chart a month ago.
The better picture of real indecision however may be in the Senate Race where the bets have all come together.
We will update the weekly charts this weekend as usual. Uncertainty abounds as the risk reward narrows, just ask a Google shareholder.
thanks for reading The Market Perspective.